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| Sebi to seek legal view on NSDL row |
| BS Reporter / Mumbai Apr 14, 2009, 00:12 IST |
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 The board of the Securities and Exchange Board of India (Sebi) On Monday decided to seek the opinion of a legal expert on the issue of whether it had the authority to examine if the committee appointed to look into the National Securities and Depository Limited (NSDL) issue had acted within the framework of the terms of reference established by the board resolution.
Pending that, the board decided to withhold the orders of the committee with one member dissenting with this decision. In a statement, Sebi said its Chairman C B Bhave had recused himself from these discussions and decisions. This was because there was a conflict of interest arising due to his previous position as chairman and managing director (CMD) of NSDL during the 2003-2005 period, when over 50,000 benami accounts were opened with NSDL and Central Depository Services Limited (CDSL).
In March 2008, after Bhave joined Sebi, the regulator had set up an independent three-member committee comprising board members G Mohan Gopal, director, National Judicial Academy, V Leeladhar, former deputy governor, Reserve Bank of India (RBI), and Anurag Goel, secretary, Ministry of Corporate Affairs, to oversee the conduct of all proceedings initiated by Sebi against NSDL.
Goel left the committee a few months later, and the two-member committee passed an order against NSDL in December. In the order, the committee accused CDSL and NSDL of acute irresponsibility towards adherence to minimum know-your-customer (KYC) norms. Bhave, who was the then CMD of NSDL, was held responsible for his carelessness, eventually leading to the opening of over 34,000 benami accounts at NSDL alone for sidestepping IPO funds.
The details of the December order are yet to be updated on the Sebi website. Some board members argued that Sebi neither has the legal authority to modify or review the details of the order, nor does it have the right to delay in making such orders public on its website.
The IPO scam first came to light in April 2006, when Sebi discovered that over 50,000 demat accounts were opened with NSDL and CDSL for circumventing gains from IPOs of 21 companies during the period. The accounts were used to corner shares reserved for retail investors.
In April 2006, Sebi said that the depositories had failed to discharge their duties. Later, when NSDL approached the Securities Appellate Tribunal, this order was stayed on the basis that Sebi had probed the scam by using the databases of the two DPs themselves.
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